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OPEN HOUSE

Mortgage Meltdown Continues; Easy Home Repairs; Save Money and Make Your Kids Look Good

Aired September 8, 2007 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


T.J. HOLMES, CNN ANCHOR: The truck tried to buy drugs. So he's not doing well all the way around meanwhile, the police in Albany, New York, looking for a man who stole an 87-year-old woman's purse. You know what, stole the car after that.
BETTY NGUYEN, CNN ANCHOR: All right. But here's the deal, it was caught on tape and surveillance video shows the suspect following the woman into a store. Minutes later, we see her car driving away. The victim says she's not too shaken up. She just wants her belongings back.

(BEGIN VIDEO CLIP)

VIRGINIA ADAMS, ROBBERY VICTIM: You know, I was physically all right. And it was going to be a terrible inconvenience.

(END VIDEO CLIP)

NGUYEN: Well, police say it took the robber only five minutes to pull off both purse snatching and the car theft.

HOLMES: 87-year-old woman. Preying on an 87-year-old woman. Hopefully she gets her stuff back but it's good to see she's all right.

NGUYEN: We do have live coverage from Italy coming up this morning as thousands gather to say good-bye to one of the greatest voices of our time.

HOLMES: Well stars and fans are remembering Luciano Pavarotti. We'll be talking about that coming up at the end of the top of the hour. But first, we want to get you to OPEN HOUSE with Gerri Willis.

GERRI WILLIS, CNN HOST: Hello. I'm Gerri Willis, and this is OPEN HOUSE, the show that saves you money.

More debate on the mortgage meltdown this week. That's pretty much all it was, debate. Federal regulators appeared before the house financial services committee to talk about the steps the government is taking to protect homeowners. While the debate rages on, for many homeowners the help comes too late.

Steve Christ is a senior analyst and editor with "Wealth Daily" in Baltimore. Steve, welcome.

STEVE CHRIST, EDITOR, "WEALTH DAILY": Good to be here, Gerri, thank you.

WILLIS: Let's get to it. Is Washington doing enough here?

CHRIST: Well Gerri, I think Washington is a little late to the party here. The town has practically burned down and they have pulled up now with their fire trucks. I'm glad Congress has taken the lead and is actually talking about getting some meaningfully reforms done in the business. It's sorely needs it.

WILLIS: It's harder than it looks. I want you to listen to this from the hearings this week. This is Bernie Frank and he is chairman of the services committee in Congress.

(BEGIN VIDEO CLIP)

REP. BERNIE FRANK, CHMN., HOUSE FINANCIAL SERVICES COMMITTEE: There is a consensus that regulation in the mortgage market has not kept up with invasion. And when innovation, regulation should catch up. Regulation has to be sensible.

(END VIDEO CLIP)

WILLIS: Is this an innovation problem or is it, as you said, recent column the fact that lenders are like lemons?

CHRIST: The big problem, Gerri, is that the mortgage industry got so easy with the credit that a lot of borrowers got into loans that they simply didn't understand and they simply couldn't afford. What Mr. Frank and others were talking about in the hearing primarily was cracking down on predatory lenders and yield spread premium and doing away with prepayment penalties.

All that is fine, but it doesn't deal with the underlying problem which was the easy credit. And I think that that's really something for the markets to decide.

WILLIS: Well, and that's pretty much gone now. I mean, the way the market is trending now you can't get a loan if you want one.

But I want to show you, because I think this is really interesting, another representative talking about just how aggressive some of this advertising in the marketplace was. Let's listen to this.

(BEGIN VIDEO CLIP)

REP. GARY ACKERMAN (D), NEW YORK: I mean, we've all seen the ads and yet I don't know if alarm bells went off in people's heads or they just ignored it.

(END VIDEO CLIP)

WILLIS: Alarm bells. You know, that's being nice probably. You know what the representative was talking about there was the fact that, hey, didn't you see the same ads I did. What were you on vacation? Did you not hear what they were saying? No doc. Nothing down. How did lenders get away with that, Steve?

CHRIST: Well literally, Gerri, what the lenders did in the period I'd say the middle of 2003 onward when the housing bubble really took a giant leap is that they absolutely took 40 years of mortgage wisdom and they threw it away. And they came up with programs, these toxic loans like negative arms, interest only arms and stated loans. Of course you know the stated loan is simply a liar's loan in the business. And they came up with these programs and they marketed them to people who were desperate to get into homes.

WILLIS: Right.

CHRIST: And now we shouldn't really be surprised that we're in the mix that we are because people simply fell into the mortgage trap and they bought more home than they could afford. That's why the spike in foreclosures.

WILLIS: Right and you know we took a look at how many foreclosures there have been since Congress first started debating it, this Congress at the beginning of the year, some 817,000. While they've been talking, people have been losing their homes.

Now, there is one proposal that's out there from the president right now, a program that is, you know, helping some people or supposed to help some 80,000 people. What do you make of it? Is it enough?

CHRIST: I don't think it's enough. I think it's a great first step. Basically, if you're not familiar with FHA, FHA is a government-insured law. It's really the government's sub prime program. What the change in the guidelines are going to do for FHA is basically going to help 10 percent of the sub prime borrowers that are in trouble. Basically those folks are going to move out of their sub prime loans and into FHA loans.

WILLIS: Right.

CHRIST: That's great for the 10 percent of the people that need that. But the fact is, according to industry studies, we're looking at 2.2 million sub prime borrowers going into foreclosures over the next four years.

WILLIS: That's a lot of people.

CHRIST: Exactly and the 10 percent of that is a step forward but we're still looking at a tidal wave of foreclosures nonetheless.

WILLIS: Hey Steve, thank you so much for joining us today. Appreciate it.

CHRIST: Thank you Gerri.

WILLIS: It's time to answer what's on your mind.

Silvia in California has this question. She says, "My husband and I have just sold our house and now have $200,000 to put toward a new house. We have excellent credit and $185,000 in retirement savings already. Would you recommend waiting to buy later to see if housing prices continue to drop or using all $200,000 to put down right now on a house?"

Well, I say, first off, congratulations on putting together such a hefty down payment. That is great news. As far as timing your purchase, the best real estate analysts say that the market will continue to follow through much of next year. Given that, I wouldn't rush a home search. Start looking causally this fall. You can close the deal next year. As far as how much money to put down, median prices in your area are high, about $850,000. I'd put down at least 20 percent to get the very best mortgage out there.

The next question is from Ed in North Carolina. That's a great state. He says, "Much is said about the housing market's woes yet place like Raleigh, North Carolina don't seem to be playing by the same rules. Please report there are some places where the housing market remains rock solid."

And Ed is absolutely right. There are places doing great. Your state, North Carolina, is seeing price gains of seven percent so far this year, as is Raleigh. Other top states include Utah, Wyoming, and Washington. And that's according to federal statistics.

Now, the best way to predict which towns, cities and states will have good price gains, look for places where the job market is growing and prices haven't already gone through the roof.

Find out how to get the right mortgage from your lender, coming up, important tips. That's next.

Then don't get caught for a big bill for an easy home repair you can do yourself.

And make your kid the coolest on the block without spending a lot of cash.

But first, your tip of the day.

(BEGIN VIDEO CLIP)

WILLIS: It's decision time for Thanksgiving travel plans. We're in the critical window, 60 to 90 days prior. Some markets see prices already on the rise. The typical Wednesday to Sunday trip is the most expensive. The average price, $414. Travelers who leave early, on say, Monday, save an average $60 a ticket.

But travelers who extend their trip and return on Monday or Tuesday save even more, up to $100 per ticket. Farecast.com offers fare predictions free of charge. You can have predictions of the next seven days of whether it has risen, dropped or stayed the same. You'll get a fare history and a graph plotting the fare each and every day 90 days back. That's your tip of the day.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WILLIS: OK. If you're having trouble with your mortgage, get out your pencil. These are foreclosure prevention hotlines that were put in place to help struggling homeowners across the country. If you're one of them, there's another program out there that could help you right now. It's called FHA secure. It allows homeowners in default to qualify for refinancing. But it's only for people who have good credit histories and were making their payments on time before rates reset. You can get more information on this program at FHA.gov or by calling 1-800-call FHA.

Now with so many horror stories of bad mortgages, it's made many fearful of taking that first step into home ownership. It process could be overwhelming, but it doesn't have to be.

Meg Burns is a former mortgage originator and co-founder of a Web site called OfferAngel.com. She's in Phoenix.

Welcome, Meg. Good to see you.

MEG BURNS, CO-FOUNDER, OFFERANGLE.COM: Thank you, Gerri. Thanks for having me.

WILLIS: What's interesting is you worked in the mortgage industry for a while. And you say it's eye-opening.

BURNS: Oh, very eye opening. I was fortunate because when I started the industry I worked for a company that had very heavy compliance department. So I learned right off the bat the right way to lend to the people. When I left that company I realized the rest of the world wasn't operating the same way. It was extremely eye- opening.

WILLIS: Who do you blame out there? Who's at fault? You know we've got people are pointing fingers at lenders, at borrowers, appraisers. I mean there's a long list.

BURNS: Absolutely. And you know you can point the finger and place the blame I think in a lot of different directions. But I think ultimately there's a fairly big culprit that doesn't get a lot of attention and that's the transparency for the borrower as to what they're being offered in their mortgage.

WILLIS: You mean people don't understand their mortgage. Is that what you're saying?

BURNS: Well you know you hear a lot of people say that's their job to go find out what all of these things mean. And you know I posed a question to those people which is if I go to the emergency room to go see a doctor, is it my job to diagnosis myself and treat myself? This is an industry and a service. These people are paying for a service and they're not being paid to take advantage of. And they need to understand and be disclosed all of this information. That's where the lack of information comes in. It's not transparent.

WILLIS: Well and you know I think everybody has struggled with reading mortgage documents. They say they're written on a fifth grade level but boy, that's one smart fifth grader out there. Let me tell you. Talk to us just a little bit about how you do the 101 on the mortgage. What steps do you take to understand your mortgage? How can you understand your mortgage?

BURNS: Well, you know, in today's word, you know, the Internet is a great resource. Unfortunately, most of us don't have time to sit on the Internet or even talk with friends and family hours and hours on end to get a grasp and a handle on what all these terms are. And that's where OfferAngel.com comes in. We do this for them.

We have already put an automated system in place that will gather the information on their behalf, ask these questions that they don't know to ask every single lender they're speaking to and then when we get the information back, we put it in a way that's clear, direct and very easy to understand so they don't have to run all over the Internet to find out what's an APR, what are the comp points, what's a yield spread, or what's a margin.

WILLIS: Right. And, you know, it's fascinating because it actually looks at your mortgage offer and tells you how good it is and where it matches your goals and where it doesn't.

BURNS: We have the ability to do that. The majority of our site is free for both the consumer and the lender. You've got a great lender who wants to be up front and show you all your terms. They'll come to our site and they'll be happy to do it. That's free. We want to make this a service for consumers. We are independent and we're not part of any lender.

WILLIS: All right. What are things to look for? I think the Web site's great. But if you're out there today and you're looking at your mortgage, what are the potential pitfalls, maybe the code words you should be looking for in that documentation?

BURNS: Well, when you go to the closing table, you know, it's really important to bring, if you have your disclosures, bring those with you and see how those match up at the closing table. A lot of times you'll see a lot of different changes. The great thing about what we do is that they can also print their offers from our site and take it to the closing table as well and make sure everything is matching up. You hear a lot of things about prepayment penalties.

Definitely look at your HUD-1 settlement statement. That's where you're going to find all the fees and often times people talk about hidden costs. Those will be revealed in your final closing statement and oftentimes they're not revealed up front. That's what we do for the borrower as well, is we get that information up front so from the very beginning they can make great choices.

WILLIS: Meg, thanks so much for your help today.

BURNS: You're welcome, Gerri. Thanks for having me.

WILLIS: Still ahead on OPEN HOUSE, forget the plumber, an easy home repair you can do it yourself and save money and make your kids look good at the same time. But first, your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: Garbage disposals are one of the things we all take for granted, that is until they break. Not only can it be costly to fix but it can be smelly as well. Can you do it yourself and save some money?

We checked in with our favorite handyman, Ed Del Grande from HGTVPro.com.

I know what I do when this happens, when your disposal clogs, I call somebody. And it's really expensive, Ed.

ED DEL GRANDE, HOST, HGTVPRO.COM: Well don't forget, before it clogs, usually the motor will just shut down because they have built- in circuit breakers. So if something gets stuck, that could lead to a clog. So the trick is to just remove the object in there and get did that unit going again.

WILLIS: How do you do that though? Do you know how many broken ones I've had?

DEL GRANDE: Well here's a big don't. Never reach in with your fingers, Gerri. I mean that's dangerous. So you want to keep your fingers clear of the hole. But I'll tell you what you can use, pick that up. That's a mechanical grabber, a grabbing tool. Look at that.

WILLIS: Wow.

DEL GRANDE: That even grabs better than your fingers because it reaches into tiny areas. You can push that in there, grab the obstruction.

WILLIS: That is so cool.

DEL GRANDE: Isn't it? Put the flashlight in there and you can see what you're doing.

Another big tip before you touch the disposal to do any repairs, shut off the power at the breaker. You want no juice going to the disposal at all. So shut the power off at the breaker. Once you clear out the big objects, you have to go underneath the sink. This is what it would look like.

WILLIS: How come?

DEL GRANDE: This is how you actually fix it and get it going again. Get the wrench and stick it right there. Now if it's jammed up it will be stuck so you use a little muscle, work it back and forth.

WILLIS: Look at that.

DEL GRANDE: There you go. Once you free that wheel in there, you can remove the wrench. And here's the trick that most people don't know about. See that red button, that's your breaker. You push that back in. That will reset the breaker in the disposal. Then you go back to your circuit panel, open up the main power breaker and the fuse will run like new and you saved yourself a service call.

WILLIS: And a lot of money. We could start earlier with this problem. What is it you don't put in your disposal?

DEL GRANDE: Well I have some things for you that you absolutely don't put in. Anything stringy. You see like corn husks, celery, broccoli. Anything that has fibers, when that disposal is spinning, it will wrap around the components and that can really cause a lot of trouble for your disposal.

WILLIS: But you say something weird about peach pits. I would never put a peach pit in my disposal.

DEL GRANDE: Feel free. Throw all the pits, chicken bones in there. This is actually good. This will sharpen up some of the blades and clear it out because it grinds against the walls and feel free to throw all that good stuff in there. Then it won't smell up your garbage at home.

WILLIS: You said no broccoli though.

DEL GRANDE: No broccoli, no stringy stuff but speaking of smells. If it gets some odors, believe it or not, you can just get a lemon.

WILLIS: Whole lemon.

DEL GRANDE: A whole lemon, grind it up and it will smell like a spring day.

WILLIS: How about baking soda.

DEL GRANDE: You can do that if you want. Just remember no stringy stuff or no dried stuff like dried rice or noodles. They can swell up when they get wet and that can lead to a clog.

WILLIS: When do you know you actually need a plumber?

DEL GRANDE: If you can't free it with a wrench, it can get into the components. A heavy-duty clog needs a contractor. If that doesn't work, call the Calvary.

WILLIS: All right Ed. You're the Calvary. I'll give you a jingle.

As always, if you have an idea on how to save money, send us an e-mail to OPEN HOUSE at CNN.com. If you want to check out the project savings again, check out the Web site, CNN.com/open house.

And it's back to school. We have everything you need to know about what's in and what's out this year. But first a hot college town in this week's local lowdown. Check out what you can do for free in Boston. The freedom trail is one of the best known tourist activities and won't cost you a penny. Take a two and a half mile walk to 16 historic sights. Try out sailing at the Boston sailing center. Once a month, you can take a 30-minute ride around Boston harbor for absolutely no cost. And if you're looking for something you'll never forget, visit the museum of dirt. That's right, dirt. It contains more than 300 vials of dirt from celebrity homes and other exotic locations. That's this week's local lowdown.

(COMMERCIAL BREAK)

WILLIS: That's a whole lot of dough. Well, it's back to school time. For parents that means one thing, school supplies. Camille Chatterjee is here from "Parenting" magazine to tell us what you should be spending your money on and what isn't worth it. Let's start right there. Where do you want to spend your money and where should you be more careful?

CAMILLE CHATTERJEE, EDITOR, PARENTING MAGAZINE: Well safety is always really important so the backpack is the first thing you should spend on. You know padded straps, backpack that rolls, that's worth some money. On the other hand, there are a million notebooks in different styles. All you need is at basic spiral-bound.

WILLIS: Buy everything on the list the teacher gives you and don't go beyond that.

CHATTERJEE: Exactly. Yes.

WILLIS: This is so cute. I love this. A little penguin. Look at this, it's a backpack and you can pull it. Those little kids hurt themselves sometimes.

CHATTERJEE: For pre-schoolers, the books are so heavy you want to avoid straining the back so you pull this along. It is only $20. So you're getting two purposes for one backpack.

WILLIS: It has all these cute pockets. I've been playing with this for half an hour. OK. All right. Let's move on. That was kind of fun. Lunch totes are very different than they used to be.

CHATTERJEE: They really are. We used to have the old plastic white-handled. These are stylish. They are collapsible. This is cute. It's only $10. It's a place mat. It's fully insulated. You can see from the silver.

WILLIS: It's fully insulated if you have that fabulous. OK. So this is adorable as well.

CHATTERJEE: Yes. This is also a backpack that's insulated. It's from Modern Kids Sonoma. It's easily personalized so you can take that postcard out of the front flap. You can put in your own pictures. You can put in stickers. So what gives this the bang for the buck is once you get sick of it you can always change it up.

WILLIS: I love that. Do you know how much that is?

CHATTERJEE: That is also $20.

WILLIS: OK. We're trying to keep the price down. Tell me about these.

CHATTERJEE: These are great. You can actually use the lunch tote as a chalk board. You can write a note to your child on it in the morning. You can take it in the car, use it as a toy. And you're saving money because instead of paying for brown paper bags you're reusing the one tote all year.

WILLIS: And it comes with its own chalk, which is highly important.

CHATTERJEE: So you're set.

WILLIS: Now, tell me about this fabulous gizmo with the teddy bear on front.

CHATTERJEE: It's more of a time and sanity saver than money saver. It's $17. If your child is having trouble you getting out of the house, program it for 20 minutes. It will count down and the lights will go from red to yellow to green.

WILLIS: And it makes a very big noise.

CHATTERJEE: A very large noise which we won't simulate now but your child knows when it gets to green, that's when your child needs to get out of the house.

WILLIS: How much does it cost?

CHATTERJEE: $17.

WILLIS: Now we have something that looks boring. It's AT&T phone, but it's not boring.

CHATTERJEE: No. Just this week, AT&T launched a new parental control service, meaning that parents can go online and control how many minutes their children are spending on phones. They can block people.

WILLIS: Show people how you do that.

CHATTERJEE: Sure.

WILLIS: The devil is in the details. You get the phone but how does the service work, you have no idea. You can actually go online and say I want the child to be able to do this and not this, very detailed.

CHATTERJEE: Very simple. Any AT&T user can do it. Go to AT&T.com, they enter their wireless number and password, go to smart limits, manage smart limits.

WILLIS: And the cost?

CHATTERJEE: It's $5 a month, which is great for a lot of features.

WILLIS: Thank you so much for being with us today. You can hear much more about the impact of this week's news on your money on "YOUR MONEY" with Christine Romans and Ali Velshi, coming up in a few hours at 1:00 p.m. right here on CNN.

As always, we thank you for spending part of your Saturday with us. "OPEN HOUSE" will be back next week right here on CNN and you can catch us on "HEADLINE NEWS" every Saturday and Sunday at 3:30 p.m. eastern time.

Don't go anywhere. Your top stories are next on CNN "NEWSROOM." Have a great weekend.

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